According to the terms of the Option Agreement, ROC will fund NWE's share of the recently completed 522 sq km Macallan 3D seismic survey up to a maximum expenditure net to ROC of A$525,000. In the event that ROC wishes to exercise the option to acquire NWE's 7.5% interest in WA-226-P, it shall make a further cash payment to NWE of A$200,000 within four months of ROC receiving the processed 3D seismic or within one month of ROC receiving the operator's interpretation of that data, whichever is earlier. ROC shall make a final one-time cash payment of A$375,000 to NWE if a discovery within WA-226-P is declared commercial.
WA-226-P is located in the northernmost part of the offshore Perth Basin, immediately on structural trend from and adjacent to WA-325-P and WA-327-P. ROC operates both these last mentioned permits and has a 37.5% interest in each.
In 2002, the WA-226-P Joint Venture drilled the Morangie-1 exploration well which encountered 25 meters of good oil shows in the reservoir objective, although the shows proved to be residual and the well was plugged and abandoned. Morangie-1 was not drilled on 3D seismic and that may have been one of the reasons why the WA-226-P Joint Venture decided to acquire a 500 sq km 3D seismic survey prior to drilling the next well, which is expected to be the Fiddich-1 exploration well during 2004.
Although WA-226-P is 250 km northwest of that part of the Perth Basin which has recently emerged as a "sweet spot" for exploration through the successful discoveries of the Cliff Head, Hovea, Eremia and Jingemia oil fields, it is still considered to be related to a broad regional prospective trend, Approximately parallel to the Western Australian coastline over a distance of some 350 sq km.
Commenting on the transaction, ROC's Chief Executive Officer, Dr John Doran, stated that: "The acquisition of the option is consistent with ROC's strategy of focusing on its core areas, in this case the offshore Perth Basin – and also its fondness for options.
As with the recent deal involving ROC's acquisition of an additional 7.5% interest in the Cliff Head Oil Field, this transaction was possible because both parties were prepared to share the downside risk and upside reward that is always associated with exploration activity.
As a result of the transaction, ROC now has working, or option, interests in 30,700 sq km (7.6 million acres) covered by six contiguous permits in the northern Perth Basin. This is a land bank that will become extremely valuable if the area realizes even a portion of the prospectivity which is now assigned to it by some industry players, including ROC.
In the event that ROC chooses to exercise its WA-226-P option, the transaction will also provide the Company with an additional exploration well for its 2004 drilling program."
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